- German 40 index looks for a bullish channel breakout
- Will the index resume its long-term uptrend?
The German 40 index (cash) has been trending southwards within a channel since marking the record high of 17,000 in mid-December.
The downward-sloping formation could be part of a bullish continuation flag pattern followed by the almost vertical October-December uptrend. The index is currently seeking confirmation above the 20-day simple moving average (SMA) and the 16,700 level. If its efforts prove successful, it could crawl up to the 16,890 barrier, a break of which could see an advance towards the resistance line from May 2023 at 17,120. Even higher, the door could open for the constraining ascending line from March 2023 at 17,260.
The positive slope in the RSI, which has bounced back above its 50 neutral mark, and the upward move in the stochastic oscillator, are reflections of improving sentiment. Nevertheless, a pullback below the 20-day SMA could upset traders, shifting the attention back to the 50-day SMA at 16,425. Should that floor crack as well, the sell-off could expand towards the channel’s lower boundary seen at 16,250. Another failure there could expose the market to the 16,000 round level.
In brief, despite its short-term downward trajectory, the German 40 index seems to be seeking a bullish continuation, with the confirmation expected to come above 16,700.
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